Bread PAC v. FEC

This suit, filed by the National Lumber and Building Dealers Association and the National Restaurant Association (trade associations) and by Bread Political Action Committee, Restaurateurs Political Action Committee and Lumber Dealers Political Action Committee (separate segregated funds of trade associations), challenged the constitutionality of 2 U.S.C. §441b(b)(4)(D). (Civil Action No. 77-C-947.) This provision of the election law restricts solicitations by a trade association or its separate segregated fund to the stockholders, executive and administrative personnel (and their families) of member corporations which have given prior approval for such solicitations to occur, and limits member corporations to approval of one trade association per calendar year.

District court ruling

On April 5, 1977, plaintiffs asked the U.S. District Court for the Northern District of Illinois to enjoin the FEC from enforcing 441b(b)(4)(D) or, in the alternative, to certify constitutional questions to the appeals court, pursuant to 2 U.S.C. §437h. (Section 437h allows for expedited handling of constitutional challenges to the Act and a right of direct appeal to the Supreme Court.)

The district court ruled in September 1977 that plaintiffs lacked standing to bring suit under the Act's expedited review procedures. The court held that only the following types of plaintiffs had standing to bring suit under 2 U.S.C. §437h(a): the national committee of a political party, individuals eligible to vote in Presidential elections and the FEC.

Appeals court: first ruling

On January 12, 1979, the U.S. Court of Appeals for the Seventh Circuit, sitting en banc, overturned the district court's decision in response to an interlocutory appeal filed by plaintiffs. The appeals court ruled that plaintiffs did have standing to bring suit under the expedited review procedures. It remanded the case to the district court for further fact finding and certification of the constitutional questions. These constitutional challenges were then certified to the appeals court for its decision:

• Whether 2 U.S.C. §441b(b)(4)(D), both facially and as applied, infringes plaintiffs' right of assembly guaranteed by the First Amendment;
• Whether 2 U.S.C. §441b(b)(4)(D), both facially and as applied, deprives plaintiffs of liberty without due process of law in violation of the Fifth Amendment;
• Whether the failure of the Federal Election Campaign Act, as amended, 2 U.S.C. §431 et seq., to define the term 'solicitation' infringes plaintiffs' right of assembly guaranteed by the First Amendment...or deprives plaintiffs of liberty without due process of law in violation of the Fifth Amendment;
• The failure of the Federal Election Campaign Act, as amended, 2 U.S.C. §431 et seq., to define the term 'trade association' as used in 2 U.S.C. §441b(b)(4)(D), violates the due process clause of the Fifth Amendment.

Appeals court: second ruling

As to the issue of plaintiffs' standing to bring suit under 2 U.S.C. §437h(a), the appeals court declined to overrule its earlier decision that Section 437h(a) did not limit parties who may utilize the expedited review procedures.

As to constitutional challenges brought by plaintiffs, the court rejected their claim that Section 441b (b)(4)(D) infringed on their First Amendment rights by requiring that plaintiffs obtain the prior approval of a member corporation to solicit the corporation's stockholders, executive and administrative personnel and their families. The court found that there had been no showing that this restriction on trade association solicitations "...has had or could have any prior restraining effect whatsoever on the free flow of political information and opinion by trade associations or their political action committees." The court noted that plaintiffs were "...free to solicit any individual...to join their trade association." Moreover, once he or she became a member of the association, the individual could "...be solicited for contributions without limit under §441b (b)(4)(D)." Thus, the court concluded that the challenged provision was "...a very narrowly drawn aspect of a statutory scheme carefully designed to balance a compelling governmental interest [i.e., the prevention of the appearance or actuality of corruption in federal elections caused by large contributions] and jealously guarded First Amendment freedoms."

The court also rejected plaintiffs' claim that §441b(b)(4)(D) unconstitutionally discriminated against trade associations. The court found the exact opposite to be true and concluded that plaintiffs' argument was "...largely premised...on a misreading of the statute." Specifically the court noted that, although trade associations may not solicit contributions from a member corporation's employees without the corporation's prior approval, trade associations are granted more avenues for solicitation than are corporations. "Incorporated trade associations, because they are corporations, have precisely the same solicitation rights under paragraphs (A) and (B) [of 2 U.S.C. §441b(b)(4)] as do others corporations.... Moreover, trade associations are also membership organizations or corporations without capital stock and are therefore provided precisely the same solicitation rights as they have under paragraph (C) [i.e., solicitation of their individual members].... Finally, trade associations are provided under paragraph (D) with an additional group of potential solicitees [i.e., the stockholders, executive and administrative employees of corporate members and their families]."

The court also rejected plaintiffs' claims that in failing to define the terms "solicitation" and "trade association," §441b(b)(4)(D) abridged their First and Fifth Amendment rights. The court found that the term "solicitation" had a widely accepted meaning and that rules and statutes using the term had been uniformly upheld. The court further held that the Commission's advisory opinions, which had ruled on whether certain communications constituted solicitations under the Act, were not inconsistent. Rather, the opinions (AO's 1979-13 and 1979-66) had ruled on different types of communications by corporate and trade association separate segregated funds. Similarly, the court noted that the FEC had adhered to the "plain and ordinary meaning of trade association" as defined by Commission regulations at 11 CFR 114.8(a) and (g)(1).

Supreme Court ruling

In an opinion issued on March 8, 1982, in Bread Political Action Committee v. FEC (Supreme Court No. 80-1481) the Supreme Court ruled that plaintiffs lacked standing to bring suit under 2 U.S.C. §437h, which allows for expedited handling of constitutional challenges to the Act and a right of direct appeal to the Supreme Court. The Court remanded the suit to the appeals court without ruling on the plaintiffs' constitutional challenges. The Court's ruling overturned a decision by the appeals court for the Seventh Circuit while upholding an earlier decision by the Northern Illinois district court.

The Court ruled that plaintiffs lacked standing to bring suit under Section 437h because they did not fall within the categories of qualified plaintiffs enumerated in the provision. The Court held that "the plain language of §437h controls its construction, at least in the absence of 'clear evidence,'...of a 'clearly expressed legislative intention to the contrary....'" The Court concluded that "the appellants, however, fall far short of providing 'clear evidence' of a 'clearly expressed legislative intention' that the unique expedited procedures of §437h be afforded to parties other than those belonging to the three listed categories."

Nor did the Court find merit to plaintiffs' argument that, since Congress had expressly extended the judicial review procedures of Section 437h to cover all constitutional questions about any provision of the Act, Congress had also intended to broaden the categories of plaintiffs eligible to file suit under §437h.

Moreover, the Court refuted plaintiffs' contention that, while Congress had specified three eligible classes of plaintiffs to remove any doubts about their standing to bring suit, it had not intended to exclude other classes of plaintiffs. To the contrary, the Court concluded that Congress "went to the trouble of specifying that only two precisely defined types of artificial entity and one class of natural persons could bring these actions." The Court noted, however, that its ruling did not affect the right of parties involved in FEC enforcement actions to challenge, under 2 U.S.C. §437g, the constitutionality of any provision of the Act and to be afforded expedited review.

Source: FEC Record— May 1982; and May 1981. Bread Political Action Committee v. FEC, 591 F.2d 29 (7th Cir. 1979), 635 F.2d 621 (7th Cir. 1980) (en banc), rev'd, 455 U.S. 577, (1982), on remand, 678 F.2d 46 (7th Cir. 1982) (en banc) (remanding to District Court).